In a mostly high-level piece about the EB-5 visa program's impact on the U.S. real estate market, Eliot Brown of the Wall Street Journal hits on an issue of great interest to any immigrant investor: the viability of EB-5 projects.

Brown's article, which ran in early February, notes how the EB-5 program has become a boon to the real estate industry at a time when low-cost financing is hard to come by. This observation has been made before. In fact, a substantial amount of media attention received by the EB-5 program centers on precisely this phenomenon.

What is most worth considering about Brown's story, however, is his observation that the immigrant investor, who may lack "great resources to scrutinize projects" is forced to make his or her own "judgments about viability." As the EB-5 community is well aware, investors risk having their residencies terminated when projects fail. And, as Brown points out, "They also stand to lose their investments."

Most positive media coverage of the EB-5 program seems to overlook this issue or else glosses over it. An upbeat editorial in Yahoo Finance last fall stated that investors who "made good on their promise to invest, created 10 jobs," and are still in the U.S. to see that "the business is an ongoing concern" after two years are able to apply for permanent residency.

What that statement omitted, however, is the fact that the regional center investor is only supposed to have passive involvement in a business. The day-to-day operation of the business receiving EB-5 financing is not necessarily supposed to be an "ongoing concern" for the immigrant investor. An investor's judgement about the whether a particular project is likely to fulfill USCIS requirements must be made before any money changes hands.

Last December's Reuters exposé certainly made note of these risks. In an example of a worst-case scenario for EB-5 investors, that report recalled the case of four Korean foreign nationals who "lost their entire investment" when an EB-5-financed dairy operation in South Dakota went under.

Brown does not mention the Reuters piece, but he manages to obtain comments about investor risk from Sam Sutton, one of the managing principals at the Lake Buena Vista Regional Center in Orlando, Florida. According to Sutton, potential termination of investor residency is "at the heart of the matter." Too many cases of project failure could cause "major problems with the program in general," he said.

Although not Brown's primary focus in covering the EB-5 visa program for the Wall Street Journal, his comments on the possibility of residency termination highlight the importance of due diligence. High risk investments warrant close scrutiny, and some EB-5 projects have?as far as USCIS is concerned?failed to deliver on the proposed business plan.